Asked on 15 Sep 2019
I’m using an online broker to buy Apple stock, but from what I know there is a 30% tax on dividends for US stocks.
Do I sell the stocks before dividends payout to not get taxed? Or what do people usually do?
I'm not investing in US stocks at the moment, but from what I read, some people will choose to reinvest their dividends.
This way, they won't get taxed for their dividends, and they will also be able to buy more shares.
I use FSMOne and I've bought into stocks that offer dividends as well. Their dividend handling fee is $2 and thankfully, even though the dividend is less than $2, I do not have to repay the broker the excess dividend handling charges.
But if you're talking more about the share price, it is quite negligible (even more especially in the case of Apple as can be seen from it hitting 52 week highs)
On historical records of those companies that give good dividends, the drop at the end of the years are usually lesser than the 30% tax incurred. If you are long term and got it at a low price, there is no need to sell and rebuy them later.
However, i do know of some traders who hunt for these dividends stocks at year end to collect them at a lower rate.
Yes you can sell the stocks before the ex dividend date to avoid tax. However if you are a long term investor like how many foriegn investors who own apple stocks, just buy and hold. The 30% US dvidend tax is aprt and parcel of the US system
Yes, you will get 30% tax on the dividends. On whether to sell the stocks or not, I think you have to ask yourself - what was the reason you bought into Apple in the first place? If you bought it for dividends, and you sell before dividends, you don't actually get the dividends at all. And if you buy into it again, then it kinda makes no sense to sell it before next dividend (i.e you are buying for their growth, capital gains).
If the main reason for you buying into Apple is its growth, then there is no reason for you to sell (assuming you have done your own due diligience of the business). Take the dividend as a bonus and watch it compound the next few years!
The withholding tax is on the dividends only and not on your holdings on AAPL stock. So, for example, they declare 1 dollar dividend per share, you will get 70 cents in dividend due to withholding.
Personally, it doesn't make sense to sell the stock before the stock record date so as not to be hit by withholding tax. You will have to do it 4 times a year for 8 transactions in total (4 X buy/sell) as dividends are given quarterly. Not only this but you won't be entitled to the dividend as well. Don't think people will do as what you described, sorry to say.
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